Macroeconomic Developments in Serbia

Transcription

1 Macroeconomic Developments in Serbia January 218

2 Continuation of Macroeconomic Stabilisation in 217 Inflation and inflation expectations stayed within the NBS target tolerance band throughout 217; in December y-o-y inflation stood at the target midpoint (3,%). Government budget turned into a surplus in 217, resulting in the sharp fall in public debt (from 71.9% of GDP at end-216 to 62.6% in November 217). These results were acknowledged by improved credit ratings (S&P, Fitch and Moody s) and the successful completion of the eighth review of Serbia s stand-by precautionary arrangement with the IMF... and, quite importantly, lead to a sharp decline in the country risk premium (as of mid-december, EMBI for Serbia has been below 1 bp, at all-time low levels). The strong increase in the FDI continued, outperforming the 216 result by 37.5% y-o-y (Jan Nov 217), more than fully covering the CAD for the third consecutive year, supporting dynamic export growth. The dinar strengthened against the euro in 217 by.2%, while the NBS net bought EUR 725 mn. Due to low inflationary pressures monetary easing continued, while interest rates, both on dinar and FX loans, reached their historical lows in 217. Led by demand and supply factors, lending activity recovered further, reaching 7% y-o-y in November (11.3% excluding the effects of the NPL write-offs). Serbian banking sector stability has been preserved and further reinforced in 217. Encouraged by the NBS measures, the share of NPLs in total loans plummeted (from 17% at end-216 to 11.1% at end- November 217), to below the pre-crisis level. Capital adequacy indicators are even stronger after the adoption of Basel III standards in Serbia. All of the above created a favorable environment for growth acceleration in the coming period. 2

3 Price Stability Maintained, Inflation Within the Target Tolerance Band in the Coming Period Inflation and inflation expectations kept within the NBS target throughout 217 Chart 1 CPI and inflation expectations developments (y-o-y rates, in %) 16 Inflation will continue to move within the target tolerance band Chart 2 Inflation projection (from November 217 IR) (y-o-y rates, in %) CPI Inflation Core Inflation* Inflation expectations of the financial sector (Bloomberg) *CPI excl. Food, Energy, Alcohol and Tobacco In 217 the NBS remained successful in achieving price stability its primary objective. In December y-o-y inflation stood at the target midpoint (3.%). The greatest contribution came from food prices. Core inflation hovered around the lower bound of the target tolerance band during 217, ending the year at 1.3% y-o-y (the lowest level), confirming that inflationary pressures are low. Inflation expectations of the financial sector and corporates remained anchored within the NBS target tolerance band Throughout the whole projection horizon, our inflation projection indicates that inflation will stay within the target tolerance band. We expect a drop in y-o-y inflation in the first half of 218, as last year s one-off price increases drop out of the y-o-y comparison. At the same time, further recovery of aggregate demand will work in the opposite direction. The risks to the projected inflation path are symmetrical and related to future developments in the global commodity and financial markets, and, to a certain degree, to administered price growth. 3

4 GDP on a Stable Upward Path Diversified and export-oriented economic growth continues Chart 3 GDP developments (seasonally adjusted, 26=1) 16 Q Q2 Q *NBS estimate Q2 Q Q2 Q Q2 Q Q2 Q Q2 Q Q2 Q Q2 Q* According to preliminary data, GDP growth in 217 amounted to 1.9%. GDP growth in 217 was led by all sectors (except agriculture), while from the expenditure side growth was led by the recovery in private investment and private consumption. Again, looking at the trends and structure, following a strong growth in 216, GDP slowed down temporarily in H1 217, affected by adverse weather conditions. Outside supply-side shocks, the rest of Serbian economy was growing at the rate of around 3%, with manufacturing, private consumption, private investment and exports growing faster than expected. As expected, growth additionally accelerated since, and in Q amounted 2.8%. GDP growth expected to accelerate in the coming years Chart GDP growth projection (from November 217 IR) (y-o-y rates, in %) Investment in export-oriented sectors will be the main driver of the 3.5% GDP growth in 218 and 219. Growth accelerated owing to macroeconomic stabilisation, improved business environment, higher government capital spending, effects of monetary policy easing, implementation of structural reforms and demand growth

5 Improved Business Environment Resulted in Strong FDI Inflow Structural reforms, improved business and investment environment have attracted a high FDI inflow Chart 5 Net FDI (EUR bn) 3,5 3, 2,5 2, 1,5 1,,5, 8.6% of GDP * * NBS forecast 7.% 6.7% 3.8% 9.9% 2.% 3.8% 3.7% 5.% 5.5% 5.7% which is well-diversified and concentrated in export-oriented sectors Chart 6 FDI composition by sector (% of inflow) Other Construction & real estate Finance Trade Manufacturing As at November 217, net FDI inflow stood at EUR 2.3 bn (up by 37.5% y-o-y), exceeding the projection for 217. The improvement of the business environment can also be observed by the further improvement on the World Bank Doing Business list (Serbia moved up from 7 th to 3 rd place). According to FT (August 217), Serbia has the best global performance index for greenfield FDI in the world. During a five-year period, FDI was project-diversified and mostly directed to export-oriented sectors. Within manufacturing, most FDI inflows went to the production of motor vehicles, base metals, rubber and plastic, pharmaceuticals and chemicals. They led to quite positive trends in employment, production and exports in manufacturing. FDI inflows are diversified by the region of origin as well, with a greater share of countries from the Asia Pacific and Middle East regions, alongside the EU. 5

6 CAD More Than Fully Covered by FDI Dynamic and well-diversified export growth will lead to stable levels of the CAD in the coming years as well Chart 7 Exports and imports (seasonally adjusted, 28=1) Exports, lhs Imports, lhs X/M coverage (12M MA), rhs % 8% 7% 6% 5% % Chart 8 Current account deficit and remittances (% share in GDP) CAD Remittances Inflow * 218* * NBS forecast In 217 (Jan Nov), both exports and imports saw two-digit growth rates. Exports grew by 11.5% y-o-y, while imports grew by 1.2% y-o-y. Higher growth in imports was led by imports of capital and intermediate goods, as well as energy due to cold weather at the beginning of the year and higher oil prices. The rise in exports remained strong, diversified and in line with our projection, led by manufacturing exports (+1.% y- o-y), with nearly all branches recording growth (22 out of 23). In 217 we expect a temporary increase in the CAD share in GDP, due to supply-side shocks in energy sector and agriculture, which affected foreign trade movements in, as well as due to higher imports of capital and intermediate goods. In the medium term, we expect the CAD to be around % and to be fully covered by FDI. 6

7 Sustained Improvement of Fiscal Position Structural fiscal adjustment as of 215 yielded better-than-expected results and amounted to around 6% of GDP Chart 9 Fiscal revenues, expenditures and result (% share in GDP) Primary balance, rhs Revenues, lhs overall balance: Fiscal balance, rhs Expenditures, lhs Fiscal balance switched to a surplus of 2.5% of GDP during nine months of 217, with a primary surplus of 5.7% of GDP. While the bulk of the consolidation programme was based on expenditure-side measures in 215, fiscal improvement since 216 has been driven primarily by higher revenues, on the back of economic growth and improved collection of all tax revenue items. Fiscal balance in 217 will remain in surplus throughout the year, while the 218 deficit is projected at.7% of GDP, mainly due to a sharp increase in public investment, well calibrated rise in wages and pensions and labour tax cuts I - IX resulting in a decline in the public debt-to- GDP ratio since 216 and its stable downward path in the coming years Chart 1 Public debt (central government) EUR bn External, lhs % of GDP, rhs 21 Internal, lhs 215 in % of GDP 8 Central government debt amounted to EUR 23. bn at end-november 217, which is 62.6% of GDP (compared to 71.9% at end-216). Measures to continue the structural adjustment include reforms of public enterprises and further improvements to the efficiency of the Tax Administration. The Government adopted the Fiscal Strategy, which entails a medium-term deficit target of.5% of GDP (consistent with a continuous decline in the debt ratio)

8 In September and October the policy rate was cut by 25 bp both times Monetary Policy Easing on the Back of Low Inflationary Pressures, Anchored Inflation Expectations and Low Risk Premium Monetary policy easing was also achieved through a reduction in the FX required reserve Chart 11 Interest rates (y-o-y rates, in %) Private Sector* (3 months moving average) Policy Rate Deposit Facility Lending Facility BELIBOR 1W *weighted interest rate on non-indexed RSD loans (up to September 21 the data was exclusively used for research purposes of NBS) Cuts in September and October supported by a lower medium-term inflation projection, along with decreased country risk premium, anchored inflation expectations, and lower imported inflation. In line with the two cuts, money market interest rates have declined as well. Since November, the rate has been on hold. The decision was guided by the expected effects of past monetary policy easing, as well as better economic performance in H ,6 Chart 12 Reserve requirement ratios (in %) FX <2y RSD <2y FX >2y RSD >2y In order to support lending activity, the NBS eased monetary conditions through the required reserves in late 215 and early 216. During that period the NBS cut the FX RR ratio by 6 pp (to the level of 2/13% for liabilities up to/over 2Y maturity), thereby releasing banks credit potential by app. EUR 73 mn (o/w app. 2/3 in foreign currency and 1/3 in RSD). In December 217, RR amounted to EUR 1.7 bn and RSD bn

9 By Lowering the Key Policy Rate the NBS Supports Credit Activity Interest rates on dinar loans have declined significantly over the last four years Chart 13 Interest rates on loans new business (3 months moving average, in %) Dinar loans to enterprises - l.h.s Dinar loans to households - l.h.s Eur-indexed loans to enterprises - r.h.s Eur-indexed loans to households - r.h.s Monetary policy easing from May 213 (by 8.25 pp) was the key determinant of the significant fall in dinar lending rates to enterprises and households (by around 1 pp until November 217). In November, interest rates on new dinar loans stood at 6.6% for corporates and 1.6% for households. In parallel to new business, interest rates on outstanding loans also fell sharply, leading to a higher disposable income of both households and corporates. In the observed period, monetary easing by the ECB and a sharp fall in the country risk premium contributed to the fall in EUR-indexed lending rates Economic activity growth and lower costs of financing remain the main drivers of bank lending activity Chart 1 Bank lending to enterprises and households (y-o-y rates, constant exchange rate 3 Sept 21, in %) Enterprises Households Total Enterprises* Households* Total* * Excluding the effect of NPL write-offs over the last year Total domestic lending equaled 7.% y-o-y in November 217, with lending to households up by 11.8% y-o-y, and improved lending to enterprises (3.1% y-o-y), especially from June. Excluding NPL write-offs, total domestic loans rose by 11.3% y-o-y in November 217, with corporate loans up by 8.7% y-o-y and household loans up by 1.3% y-o-y. In 218 as well we expect growth in domestic lending, facilitated by the effects of monetary policy easing, a rise in economic activity and further labour market recovery, competition among banks and low interest rates in the international money market. 9

10 Sustainable Economic Prospects Confirmed by Serbia s Improved Rating and a Fall in Risk Premium Serbia s risk premium reached its all-time low The dinar strengthened against the euro in 217 Chart 15 EMBI risk premium (basis points, daily values) Chart 16 Exchange rate developments (31 December 212 = 1) 6 5 EMBI Global Romania Hungary Poland Turkey Serbia Croatia 15 Serbia Poland Romania Hungary * *Until January 9, 218 Macroeconomic stabilisation in Serbia combined with a fall in global risk aversion resulted in a sharp decline in the country risk premium that recently hit its all-time low (88 bp on 9 January 218). In March 217 Moody s upgraded Serbia s rating from B1 to Ba3, while in December 217, both S&P and Fitch upgraded Serbia s issuer rating from BB- to BB, with a stable outlook for further credit rating improvement * *Until January 9, 218 Appreciation pressures prevailed in the major part of the 217 due to improved outlook of Serbian economy - a high inflow of investment and the continuation of vibrant export growth. Depreciation pressures since end- November were anticipated and have a seasonal character. After purchasing EUR 52 mn net in 215, and selling EUR 16 mn net in the IFEM in 216, the NBS purchased EUR 725 mn net in 217. Since the beginning of 218, the NBS has sold EUR 75 mn (by 9 January). 1

11 S&P and Fitch Upgraded Serbia s Issuer Rating From BB- to BB With Stable Outlook The upgrade of Serbia s issuer rating resulted primarily from successful fiscal consolidation and the fact that fiscal results have been better than planned for a longer period of time, resulting in a sharp decline in public debt. Agencies also emphasise a reduction in external imbalances, maintained price stability and strengthening of the banking sector as important factors of the rating upgrade. Key drivers of the rating upgrade: Track record of better than expected fiscal consolidation results; Fitch estimates structural fiscal adjustment at the level of 6% of GDP and expects fiscal surplus to be achieved in 217, first time after 25; Earlier and faster reduction of public debt; Stable economic growth led by investments and exports; expected to accelerate to above 3% in the coming years; Multi-year period of low and stable inflation, resulting in earned credibility of the NBS; agencies believe that the NBS will remain successful in achieving its primary goal in the coming years; Stable banking system, resilient to risks, positive trends in credit activity; Share of NPLs halved encouraged by the NBS and Government measures and activities; Dynamic exports growth also in the coming years and a stable current account deficit, more than fully covered with FDIs; Diversified and export-oriented FDIs; Agencies highlight the EU accession process and continuation of structural reforms as the potential for further improvement of the business environment and acceleration of economic growth. 11

12 Upward Trend of Households Dinarisation Overall macroeconomic stability leаds to increased dinarisation of household deposits Dinarisation of household loans is on a firm upward path Chart 17 Share of dinar deposits of corporate and household sectors in total banking sector deposits (in %) Chart 18 Share of dinar in total bank receivables from the corporate and household sectors (in%) Deposits of corporations and households outstanding amounts rhs Household sector outstanding amounts lhs Corporate sector outstanding amounts rhs The NBS supports the dinarisation process by delivering low, stable and predictable inflation, preserving relative stability of the dinar exchange rate and by designing its monetary policy instruments in a dinar supportive manner. The Government contributes to the dinarisation process through tax policy and by developing the dinar securities market the dinar share of debt rose from 2.5% (28) to 23.% (November 217). The dinar yield curve has been extended to ten years. Аt end-november 217, private sector deposit dinarisation stood at 29.3% up by 9.9 pp compared to end-212 (19.3%) and up by.7 pp compared to end-21 (2.5%) Receivables from corporations and households outstanding amounts lhs Household sector outstanding amounts lhs Corporate sector outstanding amounts rhs At end-november 217, 32.8% of loans to the private sector were in dinars. Dinarisation of household loans is on the rise from 35.1% at end-212 to 51.5% at end-november 217, supported by low inflation, sharp drop in dinar interest rates, relative stability of the exchange rate, and also the NBS local currency supportive measures. Results of the dinarisation process are confirmed by the first dinar security issuance by a top-rated IFI. In December 216, the EBRD issued the 3Y dinar bond. 1 12

13 Conservative Framework Created a Robust Banking Sector High banking sector capitalisation as a result of strong prudential measures Chart 19 Capitalisation of the Serbian banking sector (in %) 26 Stress tests show that Serbian banking sector is resilient to potential adverse shocks Table 1 Core FSIs Core FSI s November 217 data CAR* 22.5% Tier I to RWA* 21.5% Liquidity indicator (reg. min 1.) Total NPLs 11.1% 18 Gross NPL LLR coverage 138.7% 16 Gross NPL IFRS coverage 61.8% Texas ratio 29.8% 1 NOP 3.7% ROA 2.1% ROE 1.6% * the last available data 3 Sep 217 CAR Tier I to RWA Equity to Assets As a result of conservative prudential measures in the previous period, Serbian banks have built up strong capital buffers, making them capable to cope with credit risk which is still relatively high. Capital adequacy indicators are even stronger after the adoption of Basel III standards in Serbia. High quality of the Serbian banking sector capital base is evidenced by the fact that Tier 1 capital accounts for the dominant share (96%) of regulatory capital. As a result of adopted measures, the NPL ratio declined by 11.2 pp since the adoption of the NPL Resolution Strategy, to 11.1% in November 217. Narrowing was most evident with corporates, the NPL ratio being reduced by 1.1 pp, to 11.9% in November 217. NPL coverage by IFRS provisions and regulatory reserves is high. Solvency stress tests confirm that the CAR remains above the regulatory minimum even in the worst-case scenario. 13

14 During the Crisis Excess Risk Aversion Pushed Asset Structure towards more Liquid Assets Serbian banking sector is highly liquid Favourable structure of banking sector assets Chart 2 Liquidity indicators of the Serbian banking sector (lhs in ratio points, rhs in %) Liquidity indicators are constantly at levels significantly higher than regulatory limits. Seasonal effects of the savings week no longer have a high impact on liquidity indicators due to a decrease in interest rates on term deposits Liqudity indicator (reg. min 1., lhs) Narrow liquidity indicator (reg. min.7, lhs) Liquid assets to total assets (%, rhs) Chart 21 Structure of banking sector assets (RSD bn), 3,5 3, 2,5 2, 1,5 1, (Nov) Cash and assets with central bank Securities Loans Other 3.7% 63.3% 19.% 13.6% Liquid assets accounted for around 37% of total balance sheet assets in November 217. The share of financial assets (predominantly government securities) has increased in the last few years, and in November 217, those assets accounted for around 19% of the banking sector s total net balance sheet assets. 1

15 Structural slides 15

16 Pick-up in Headline Inflation in 217 Driven Mainly by Unprocessed Food Prices, Core Inflation at Historic Lows Chart 22 Contributions of CPI components to y-o-y inflation (y-o-y rates, pp) Energy Services Industrial products excl. food and energy Processed food Unprosessed food CPI Inflation Tolerance Band Inflation Target Historically, short-term volatility of headline inflation was mainly driven by food prices. 16

17 GDP Growth More Sustainable than Pre-Crisis Pre-crisis GDP growth was driven by consumption, the trend reversed after the crisis in favour of investments and exports Chart 23 Contributions to real GDP growth (y-o-y rates, pp) Prior to the crisis, high capital inflows led to consumptionbased growth which resulted in increased external imbalances. With the first wave of the crisis, this trend reversed. Growth was slower, but more sustainable and driven by net exports and investments. Large-scale investments in the automobile and oil industries ( ) have helped the economy to rebalance. The new investment cycle that began in 215 is more diversified, and is leading to further rebalancing of the economy and sustainable growth *218* * NBS forecast NX G I C CII GDP GDP composition has shifted towards less consumption and more net exports and investments Chart 2 GDP composition (share in GDP) 1% C I G CII NX 8% 6% % 2% % -2% -% * NBS forecast 77.7% 76.9% 7.6% 75.% 7.7% 73.% 73.3% 72.8% -13.3% -12.% -16.9% -17.5% -13.3% -1.%-13.5%-13.9% As a consequence of the crisis, the share of private consumption in GDP is declining, bringing painful but necessary adjustments. The EU accession process and euro area recovery, as well as improvement of the investment and business climate, led to an increase in tradable sector FDIs, contributing to a more favourable GDP composition. Successful fiscal consolidation and structural reforms created a foundation for healthy growth and freed up growth potential. 17

18 Favourable Trends in the Labour Market Continued in 217 Year-on-year employment growth continues, y- o-y unemployment further reduced in followed by growth of productivity in manufacturing Chart 25 Labour market indicators according to the Labour Force Survey, (in %) IV IV IV IV IV * Unemployment rate The unemployment rate, according to the Labour Force Survey, amounted to 12.9% in 217, declining by.9 pp y-o-y. In the same period, the employment rate stood at 8.2% and was higher by 1. pp compared to 216, led by employment growth in industry and services sector. Favourable trends in the formal segment of the labour market in the last three years came from private sector employment which grew by 9.1%. This increase in the number of employees came, by and large, from manufacturing Source: Statistical Office Republic of Serbia. * Since 21, LFS data published according to the new methodology. 217 Employment rate Chart 26 Unit labour costs in manufacturing (cumulative indices, Q 21=1) Q Q2 Q Q2 Q Q ULC in manufacturing Productivity in manufacturing Real gross wages Source: Statistical Office Republic of Serbia, Central Registry of Compulsory Social Insurance, NBS calculation. Faster growth in manufacturing (6.8% y-o-y) over the three quarters of 217 than the employment growth (6.1% y-o-y) resulted in productivity gain of.6% y-o-y. This was mainly due to productivity growth in the manufacture of machinery and equipment, then in pharmaceuticals, textiles and chemical manufacturing, as well as in manufacturing of base metals. In the last three years, the highest growth in productivity has been recorded in the branches with the largest FDI inflows - steel and tobacco, chemical and pharmaceutical industries, as well as in rubber and plastics industry. 18

19 Improved External Position Owing to the Recovery of External Demand and Improved Supply of Exports Chart 27 Imports by country in I-XI 217 (EUR mn) Chart 29 External Demand Indicator (long-term average = 1) % of total imports 1.1% 8.1% 7.1%.8%.2% 3.7% 3.1% 2.9% 2.9% GER ITA CHN RUS HUN PL TUR AT RO FRA Chart 28 Exports by country in I-XI 217 (EUR mn) Chart 3 Real Effective Exchange Rate (25=1) % of total exports 12.6% 8.% 5.9%.9%.8% 3.7% 3.7% 3.6% 3.6% ITA GER BH RUS ROM MNE MKD CRO HUN BUG Source: European Commission,NBS *Growth indicates appreciation. 19

20 NPL Resolution Required a Systemic Approach and, as Such, Gave Results NPL data, November 217 Total loans (EUR bn) Gross NPL (EUR bn) NPL ratio (%) Corporates Households of which: natural persons Corporates in bankruptcy proceedings Other Total NPL movements after the adoption of the NPL Resolution Strategy, especially in 217, confirmed the soundness of the inter-institutional and coordinated approach envisaged by the Strategy. The share of NPLs recorded a significant drop by 6. pp since the beginning of the year and 11.2 pp since the adoption of the Strategy. Despite a substantial fall, companies still account for the largest share of NPLs, especially those engaged in manufacturing, trade and construction activities, as well as entities in bankruptcy proceedings. CHF-linked NPLs (7.2% of which are housing loans) accounted for 8.6% of total NPLs at the end of November 217. The continuation of NPL resolution efforts by banks, and regulatory measures aimed at the recovery of credit activity are expected to further stimulate the decrease in the share of NPLs. 2

21 Efforts on NPL Resolution and Regulatory Efforts On 13 August 215, the Government adopted the national NPL Resolution Strategy. In addition, both the Government and the National Bank of Serbia adopted action plans in order to fulfil strategic objectives. In the previous period, the NBS carried out all activities envisaged by its Action Plan aimed primarily at the enhancement of banks capacities to resolve NPLs. In line with this plan, the NBS: Published the Guidelines for implementation of IAS 39; Enhanced the reporting of NPLs by banks; Conducted an analysis regarding NPL market obstacles and limitations; Established a database on real estate collateral valuations and loans approved based on reported collateral; Introduced additional requirements for banks regarding the monitoring of collateral quality and work of persons that evaluate that collateral; Strengthened the regulatory treatment of restructured receivables in order to encourage sustainable restructuring practices and prevent unsustainable refinancing practices (evergreening); The distressed asset management in banks has been improved by introducing additional requirements for banks in the context of strategic planning; Published the Guidelines for Disclosure of Bank Data and Information Related to the Quality of Assets. Other activities envisaged by the Strategy are under the competence of ministries (finance, economy, justice and construction), as well as the Deposit Insurance Agency. In addition, by-laws implementing Basel III standards in the Republic of Serbia have been adopted, cooperation with supervisors of the home countries of banks present in Serbia is continuously developing and strengthening, and regular communication with the ECB and EBA is maintained. In August 217 the NBS adopted the Decision on the Accounting Write-off of Bank Balance Sheet Assets which applies as of 3 September 217. In December 217 Decision on Amendments to the Decision on the Classification of Bank Balance Sheet Assets and Offbalance Sheet Items was adopted in order to prescribe regulatory treatment of certain transactions related to NPLs. 21

22 Serbia s Economic Outlook Serbia NBS forecast Real GDP, y-o-y % Private consumption, in % Private investment, 1 in % Govt. consumption and investment, in % Exports, in % Imports, in % Unemployment Rate, in % n/a n/a Real Wages, in % n/a n/a Money Supply (M3), in % n/a n/a CPI, 2 in % Chart 2 National Bank of Serbia Key Policy Rate, 3 in % n/a n/a Current Account Deficit BPM-6 (% of GDP) ¹ Excluding the effect of change in inventories ² Inflation figures in the table represent Dec on Dec inflation: (Pt/Pt-12)*1-1 ³ End of period data Labour Force Survey. Since 21, data are revised according to the new LFS methodology. 22

23 Banking Sector Overview Serbia November Number of banks * 3* 29* 3* 31* 3 Employees 31,182 29,887 29,228 28,39 26,38 25,16 2,257 23,87 23,33 Branches 2,635 2,87 2,383 2,23 1,989 1,787 1,73 1,719 1,675 HHI Assets Share of foreign banks, % Assets (net), EUR m 22,53 2,15 25,211 25,322 2,827 2,55 25,59 26,253 27,993 Capital, EUR m,667,72 5,1 5,198 5,186 5,7 5,9 5,122 5,582 Loans (gross), EUR m 13, 15,32 17,2 17,273 16,1 16,17 16,175 16,2 17,27 Of which gross NPL, EUR m 2,13 2,592 3,275 3,217 3,8 3,83 3,91 2,8 1,931 Gross NPL ratio, % Deposits, EUR m 13,57 1,263 1,58 1,936 15,67 15,637 16,523 18,22 19,52 Pretax Income, EUR m ** 23*** CAR, % **** Liquidity Ratio FX ratio, % ROA, % ** 1.*** ROE, % **.7*** NIM 1, % NIM to average total asset * The NBS revoked the operating licence from Nova Agrobanka on 27 October 212, from Razvojna banka Vojvodine on 6 April 213, from Privredna banka Beograd on 26 October 213 and from Univerzal banka Beograd on 31 January 21. The NBS issued the operating licence to Mirabank on 16 December 21 and the bank started its operations in April 215. The NBS issued the operating licence to Bank of China Srbija on 2 December 216. ** with Agrobanka: Pretax Income EUR 12.m, ROA.5, ROE.2 *** with Razvojna banka Vojvodina: Pretax Income EUR12.5m, ROA.3, ROE 2.5 **** the last available data 3 Sep